Market analyst: Economy rebounds — 05/26/20

Ray Grabanski
Special to the Farm Forum

05/26/20 — The U.S. and world economies are rebounding nicely now that the private sector is once again allowed to operate in the best way possible — not just for themselves, but for the customers they serve. As much as some politicians would like to continue to control virtually everything, fortunately that’s not legal in a non-communist country. Of course, there are a few elected officials that still think their ideas from the ivory tower of state capitals should still rule, obviously now that makes little sense to almost anyone. Because when private business operates with decisions made locally (think not just state, but city, county, township, etc.), things are getting a whole lot better in both fighting the virus and economic activity.

By almost all measures, the actions of opening the economy after an initial bout against the virus is working. Virus infections are less than half per day what they were in April (and dropping), but also deaths from the virus is dropping dramatically as well. Flight passengers, restaurant meals served, retail sales and economic activity of almost every kind is going back up. So it appears that the U.S. and world economies will be much better than expected just a month ago. That is improving the outlook for the stock market, which has gained back about 60% of the losses and trading at 25,000 (vs. 29,500 high and 18,000 low). Grains and livestock, which are still trading at or near the lows, may soon follow.

Weather shows an interesting pattern recently of well below-normal precip in the western corn belt, and well above-normal precip in the eastern corn belt (especially Missouri, Illinois, Indiana, Ohio, Kentucky, and Tennessee). The past 30 days have seen some excessive rains in the eastern belt (up to 10” of rain), and the past seven days have shown mostly 1-3”-plus of rain in the states listed above. This is turning into a threatened drought in parts of the western corn belt, and the need for rainfall in the rapid planting western corn belt states could become a concern. Also, the dry weather in North Dakota may not have been in time to avoid significant prevent planting as temps simply were ice-cold for all of March and most of April; with the saturated soils to start the year, they never had a chance to dry out. Now with no time left on northern corn planting (final planting date was Monday), there was just no time to get hardly any corn planted. However, with improving drying it might be possible to get half to two-thirds of intended wheat and soybeans planted.

Forecasts show above-normal precip the next seven days in the eastern two-thirds of the corn belt, but below normal in the western one-third, with temps below normal in much of the corn belt, and above normal in the western U.S. The rain switch seems to want to turn off in the eight- to 14-day pattern, with below-normal precip and above-normal temps in the entire U.S. (hot and dry?) moving in from the west. Has the dome of doom arrived just in time for June?

Stock markets are strong recently as the economy continues to grow quickly while the COVID-19 infections continue to fall. U.S. deaths on May 25 from COVID-19 dropped to 314, only about 11% of the April peak, which clearly indicates the worries about rapid new infections was unfounded. In fact, its hard to imagine the reopening of Western countries would have gone so well. Given the pace of recovery so far, it appears the worst is far behind us, and its becoming less and less likely that the world will ever see another economic jolt like it experienced in 2020 from the COVID-19 virus. Professional sports is planning to reopen in July, and even the NBA (an indoor, packed gymnasium setting) is planning to attempt some type of season. There still are remnants of political power grabs (like continued denial of church services in some states), but even that is becoming more difficult once sensible, thoughtful preventative steps are taken. Clearly, the COVID-19 threat is waning tremendously, and that is giving stock markets and crude oil a big boost. Are grains and livestock soon to follow?